February 12, 2003

President’s Commission on the United States Postal Service 1120 Vermont Avenue, N.W. Suite 971 Washington, DC 20005.

The Printing Industries of America is pleased to express its views to the Presidential Commission on the United States Postal Service. PIA and its association partner, the Graphic Arts Technical Foundation, represent more than 13,000 printing and graphic arts companies and their suppliers, many of whom depend on a uniform nationwide mail system to serve their customers. PIA members produce virtually every type of printed product; however, a substantial amount of the printing produced by our members is intended for the U. S. mail. Conversely, other than parcels and handwritten letters, virtually every piece of mail handled by the U. S. mail is a printed product.

The nation’s commercial printing industry had shipments valued at more than $156 billion in 2002 with over one million employees. As such it is one of the nation’s largest manufacturing businesses. It would be accurate to state that an ineffective or overly expensive nationwide mail delivery system would be devastating to the U. S. printing industry.

We thank you for your willingness to serve on this important Commission and look forward to continuing the discussion to improve the U. S. Postal Service.

Sincerely,

Benjamin Y. Cooper Executive Vice President for Public Policy [email protected]

100 Daingerfield Road, Alexandria, Virginia 22314-2888 703/519-8100 fax 703/548-3227 Summary of Concerns

The following represents a summary of the issues we believe should be addressed by the Commission to improve the U. S. Postal Service:

 The concept of Universal Service should be supported;

 The Postal Service should focus on the “last mile” concept since it the basis of the positive relationship and success the service has had with the nation’s businesses and households;

 The use of the mailbox should continue to be restricted to the U. S. Postal Service;

 The rate setting process needs to be changed significantly from a cost of service model to a business model designed to attract new business to the Postal Service;

 The Postal Service should be encouraged to seek private sector partners through work sharing, negotiated service agreements, and other mail related services to both attract business and reduce the cost of operations;

 The Commission should recommend a strategy to enable the Postal Service to begin the process of closing and consolidating retail and mail processing facilities;

 The Postal Service should remain focused on its core mission and resist the temptation to enter new enterprises, which are not directly related to delivering the mail;

 The Commission should make recommendations about the agreements between the Postal Service and its unions to assure the USPS has the flexibility to enter work share agreements and other programs to improve efficiency and reduce costs; and,

 The Postal Service should develop plans to promote the use of printing and mailing and seek to recapture markets lost to alternative technology; The concept of Universal Service should be supported

One of the reasons competitive services to the Postal Service have not evolved beyond electronic communications, express service or parcel delivery is the inability of private carriers to provide universal service. The universal service concept assures that the nation’s citizens, wherever they are located, will receive mail delivery from the U. S. Postal Service. We continue to believe this principle is valid and urge the Commission to support its continuation.

The Last Mile of Service

The U. S. Postal Service provides excellent service in the “last mile.” Carrier service is very good in urban and rural areas and remains a success with the public. As the Commission addresses alternatives for the future of mail delivery, we would encourage support for this aspect of the service. We also believe the opportunities for cost reductions in the postal system are in the processing prior to the carrier.

The use of the mailbox should continue to be restricted to the U. S. Postal Service

As long as the U. S. Postal Service is a government entity at any level, it should have exclusive use of the mailbox. This restriction provides a level of confidence and security for businesses and households alike.

The rate setting process , work sharing, and negotiated service agreements

In our view, the survival of the Postal Service as a universal service capable of reaching the nation’s households and businesses requires a more private sector model of rate setting aimed at generating mail volume rather than setting rates to meet costs. The current model in its simplest form, forces the Postal Service to constantly seek rate increases even when volume is dropping, often discouraging the use of the mail. In fact, the model appears to be based on a belief that mail volume would constantly increase. Perhaps it was contemplated that a day would come when the Postal Service would have to seek business.

A new model can certainly accommodate the need to meet the cost of a particular type or class of mail while providing adequate incentives in the rate structure to develop new business and increase volume. It would be difficult for anyone observing the system to understand the complexities of the cost models used to set rates. In fact, often the two major parties in the rate process – the USPS and the Postal Rate Commission – do not agree. This alone likely demonstrates that the cost issue is somewhat open to interpretation. In this context it is certainly appropriate to expand the use of negotiated rates as an incentive for customers to use the mail and to allow businesses in the printing, publishing and other mailing concerns to develop cost savings.

The current rate-setting process is costly to the Postal Service and mailers. The process is slow and especially challenging for smaller companies. Also, rate-setting has been plagued in the past by the balkanization of the mailing industry. The setting of rates creates winners and losers forcing the classes and sub-classes of mail to battle before the Postal Rate Commission. While competition is healthy, the competition in this case is not aimed at improving USPS competition with other media, which should be the overriding objective.

Consideration should be given to the idea of a limitation on any postal rate increase to an accepted index such as the Consumer Price Index..

The Commission should recommend a strategy to enable the Postal Service to begin the process of closing and consolidating retail and mail processing facilities

It would be our hope that the Commission would recommend the reduction of a significant number of postal facilities. Facilities should be located strictly on a service and delivery model. Obviously, facility decisions should not be based on political or other non-business/delivery concerns. For retail facilities, the Commission should investigate contractor arrangements. Under the Post Office Department, private retail establishments, for example, could contract with the Postal Service to provide retail services including sales of philatelic products and acceptance of mail and parcels. Such arrangements might serve as an option for the future to provide service to more customers at a reasonable price.

The establishment and location of postal facilities still reflect the old Post Office Department in that political decisions are part of the process. A strong recommendation from the Commission to establish a business model for facility decisions would be a significant cost reduction step for the Postal Service.

Mail processing facilities should also be examined for closing or consolidating and such decisions should also be based on a business and service model; however, it is important to link such decisions to customers of the Postal Service and the availability of reliable transportation. Absent a solid recommendation and implementation plan dealing with postal processing and distribution services, it will be difficult to reduce the significant fixed costs that currently plagued the Postal Service and limit the advantages of work- sharing with the private sector. The Postal Service should remain focused on its core mission and resist the temptation to enter new enterprises, which are not directly related to the core mission of delivering the mail

The Postal Service has experimented with various retail and service programs that were not directly related to mailing. Generally, these ventures have not been successful. In addition, the ventures tended to create animosity among private companies that were in those particular lines of business. We raise this concern because the Transformation Plan developed by the Postal Service suggested an interest in using its retail facilities for other commercial activities. As tempting as this may be, it should be resisted. Philatelic services and products related to mailing and philately are appropriate. Other services and products may not only be unsuccessful, but divert resources from the core mission. Additionally, the unique connection between the Postal Service and the public in the form of universal service and the monopoly on the use of the mailbox has a reciprocal expectation that the Postal Service will limit itself to its core mission.

The Commission should make recommendations about the agreements between the Postal Service and its unions to assure the USPS has the flexibility to enter work share agreements and other programs to improve efficiency and reduce costs

We have no particular expertise in the agreements between the USPS and its various unions; however, it is predictable that significant changes involving private sector work share agreements and other arrangements with contractors may create challenges in the postal workforce. Flexibility to develop arrangements that will improve overall operations and efficiency will aid employees in the long term but may create labor challenges in the short term.

The Postal Service should develop plans to promote the use of printing and mailing and seek to recapture markets lost to alternative technology

The Postal Service and its commercial partners, including printing, publishing, direct mail, and other postal services should explore methods to generate additional business for the system. While the Postal Service conducts an active marketing program (for example, sponsorship of the Postal Service cycling team), these initiatives are aimed at positive public relations but not specifically at generating increased “sales.” We would ask the Commission to explore changes in law and policy to enable the Postal Service to pursue marketing and communications initiatives to generate mail volume.